US Supreme Court rewrites the rules on patent exhaustion

Author:Emma Barraclough
Position:Freelance journalist
SUMMARY

“When you’re RIGHT, you FIGHT,” reads the website tagline of Impression Products Inc. But the decision by the small family-owned business to fight a patent lawsuit over printer ink cartridges has had an impact far bigger than the company would ever have imagined: the rules on patent exhaustion in the United States have been rewritten, upending the business practices of companies in the repair and ... (see full summary)

 
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The dispute involved two companies: Lexmark, a Kentucky-based multinational business that makes and sells imaging equipment; and Impression Products, a West Virginia company whose 25 employees repair printers and resell printer cartridges.

For decades the printer ink industry has sought to defend its lucrative after-sales ink cartridge market, developing a range of technological and commercial barriers to deter competitors from refilling and reselling printer inks. Lexmark utilized both high-tech solutions and financial incentives. It offered customers two pricing options: a full-price ink cartridge that users could dispose of as they wish and a lower-priced version sold through the company’s “Return Program”. These cartridges were fitted with a microchip to prevent reuse, and customers agreed to transfer their empties only to Lexmark.

The legal battle between the two began when Lexmark formally objected to Impression’s business practices: buying up empty Return Program printer cartridges, filling them with new ink, removing their microchip and selling them on.

As the case wound its way through the US courts, judges were asked to consider two questions: had Impression infringed Lexmark’s patents by selling refilled Return Program cartridges in the United States when Lexmark had specifically barred reuse and resale, and had it breached Lexmark’s patent rights by importing printer cartridges into the United States that the company had sold overseas?

At the heart of the questions is the exhaustion doctrine.

The doctrine of patent exhaustion holds that once a patent owner has sold a patented product for the first time, they no longer have control over it: the buyer can use, sell, license, or destroy it as they wish. The Lexmark dispute raised questions about the extent to which a patentee can impose restrictions on what a buyer does with a product once they have bought it and enforce those restrictions under patent law. It also sought clarification about the application of the doctrine of exhaustion to goods sold overseas, where US patent law does not apply, which are then imported for sale in the United States.

The Federal Circuit decision

The importance of the issues raised by the case led Federal Circuit judges to decide to hear it en banc, citing the need to consider whether its earlier decisions on questions related to patent exhaustion remained sound in the light of subsequent rulings by the Supreme Court, including the Kirtsaeng...

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